If your company has bad debt and is considering selling the debt versus using a collection agency to recoup the money, this article is for you.
For the small to mid-sized business, outsourcing to a collections agency may be your best option.
No matter the size or type of business, debt collection will become part of your standard operating procedure. Organizations have four choices when it comes to customer debt collections:
- Writing off the debt as a loss
- Establish an internal team to handle it
- Hire a collections firm to recoup the funds
- Or, sell the debt outright
But the small to mid-sized business may struggle to fit into these four categories.
You don’t want to write the debt off because it could negatively impact the ability to get business loans. And, you may not have the resources to handle the problem internally. Alternatively, we may offer best loans that are available to small business owners.
While you may never have hired a debt collection agency or considered just selling off the debt, these two options could offer a way out for many smaller companies.
When to Hire Help and When it’s Time to Sell
Small to mid-size business owners that have tried a do-it-yourself approach to debt collections understand the amount of work it takes to handle these accounts.
These efforts are also fraught with risk; collecting debt is one of the most regulatory-laden activities in business today. Making sure you don’t run afoul of laws like the Fair Debt Collection Practices Act can add to the general frustration of having to track down money that is owed to you.
Don’t slam the door on bad debt; recoup it with a collections agency.
If the debt is older, and you’ve exhausted the DIY approach, you have two options: hire a collection agency or sell the debt.
Hiring a collection agency is a good idea if you’re having trouble collecting on a debt; turning this process over to professionals always yields a higher return. If an account reaches the 90 to 120 day past the due mark, it might be time to call for help.
Many of these agencies work on a contingency basis, meaning they’re paid from the funds they collect.
Entrepreneur shares why outsourcing collections is a smart idea:
Collectors have a vast knowledge of collection techniques, technology and compliance issues. Using a professional collection service will save time and likely yield better results than you can achieve on your own.
For customers that remain uncollected over time, selling the accounts may be an option. Debt buyers pay pennies to purchase these accounts, so it may make more sense to write it off, instead of recouping next to nothing. But if the delinquent accounts are so old that it’s unlikely that anything will ever be collected, selling the debt may be an option.
Rocket for Collections
Did you know small to mid-size business owners can assign debt collections to an agency that makes use of today’s digital technologies to acquire payment from the most difficult of debtors? We’re talking about Rocket Receivables, a service designed specifically for the small to mid-sized business owner struggling to recoup bad debt. We offer affordable fixed-fee and contingency pricing that leaves you with no surprises – just the assurance that debt recovery is in your future.
Sign up here for e-Tips from Rocket Receivables, and get more information about how we can help collect for you so you don’t have to worry about selling off bad debts.